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The interest rate, conversion rate and certain other terms of the notes are yet to be determined.

Rambus has outperformed the industry it belongs to in the last six months. The company’s shares have rallied 17.5% compared with the industry’s gain of 10.9%.

More Into the Headlines

The notes will be offered to qualified institutional buyers only and in accordance with Rule 144A under the Securities Act of 1933, as amended. The company will also give the initial purchasers of the notes an option to buy up to an additional $22.5 million aggregate principal amount of the notes to cover any over-allotment. This option will be exercisable for 13 days.

Interest on the notes will be paid semi-annually and will mature in 2023, subject to customary closing conditions.

In connection with the pricing of the notes, Rambus expects to enter into more convertible note hedge transactions with the initial purchasers or their affiliates, if required.

The company also expects to use certain portion of the proceeds to pay the cost of the convertible note hedge transactions. The remaining net proceeds will be used to repurchase 1.125% senior convertible notes of up to $60 million in aggregate principal amount (due 2018), working capital and general corporate purposes.

Rambus’ Cash Position

The enhanced capital deployment reflects Rambus’s strong balance sheet and its confidence in long-term business prospects. The company exited third-quarter fiscal 2017 with cash, cash equivalents and marketable securities of $183.6 million compared with $167.9 million in the previous quarter.

We believe that the company has a strong balance sheet, which will help it in capitalizing on investment opportunities and pursuing strategic acquisitions, further improving its growth prospects. Moreover, the senior notes offering will lower the company’s cost of capital, thus strengthening its balance sheet and supporting growth.

Bottom Line

Rambus has signed a patent licensing agreement with hard disk drive manufacturer, Western Digital Corp. (WDC - Free Report) , for an undisclosed sum. We believe this association will support Rambus’ fundamentals in the upcoming quarters.

Additionally, licensing agreements, the result of successful monetization of the company’s patents, remains a recurring source of revenues.

Going forward, Rambus recently inked a deal with eftpos, an Australian domestic debit network, to help users in Australia secure transactions with Apple.

Furthermore, the company has acquired certain serial link assets of Semtech Corporation’s Snowbush IP and Smart Card Software. These deals and acquisitions are likely to boost the company’s top and bottom-line performance. Further, it will enhance its product offerings.

NVIDIA and Micron have a long-term EPS growth rate of 11.2% and 10%, respectively.

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